News Releases

PBO launches service to cost 2021 election campaign proposals

The Parliamentary Budget Officer (PBO) will be offering election campaign proposal costing services for the 2021 election. The service, available to all recognized parties represented in the House of Commons as well as parties without official recognition, is being launched today and will enable Canadian voters to make informed choices when they go to the ballot box.

When the 44th Canadian Federal Election is Called, the PBO will be ready

The Parliamentary Budget Officer (PBO) is preparing to provide costing services for campaign proposals for the 44th Canadian federal election. The election will mark the second time the PBO has offered this optional service since the Parliament of Canada Act was amended in 2017 to introduce a role for the PBO during federal elections.

$13.7 billion each year for improving Long-Term Care

The Parliamentary Budget Officer (PBO) today released his assessment of the cost for implementing House of Commons Motion-77, tabled by Mr. Paul Manly from the Green Party which proposes several changes to long-term care for seniors. 

Changes proposed in Motion-77 include providing long-term care to all persons who need such care, requiring an average of four hours of care per resident per day, increasing spending on home care to 35% of public spending on long-term care and increasing average employee pay and benefits for private long-term care providers.

The PBO’s Cost Estimate for Motion 77: Improvements to Long-Term Care found that implementing these changes would require increasing public spending by $13.7 billion per year. 

“We estimate that approximately 52,000 people are on wait lists for long-term care, including those in hospitals”, says Yves Giroux, PBO. “Meeting the needs would require a 26% increase in the number of long-term care beds in Canada at a cost of $3.1 billion.“

Motion 77 also includes an increase in average wages and benefits for persons providing long-term care in the private and non-for-profit sectors to $25/hour, which represents a 15% increase in hourly wages, at a cost of $1.1 billion. 

In addition, this motion is intended to ensure that seniors in long-term care receive an average of at least four hours of direct care per day. According to Mr. Giroux, “This increase in the number of hours of care provided to residents in long-term care facilities would cost $4.3 billion per year.” 

The final change proposed in Motion 77 would increase spending on home care to 35% of public spending on long-term care. To reach the motion’s target an additional $5.2 billion would have to be spent each year on home care.

Federal finances sustainable over the long term—but most provinces and territories are not

The Parliamentary Budget Officer (PBO) today released his assessment of the long-term sustainability of government finances. The assessment reflects all measures in recent federal and provincial-territorial budgets.

The PBO’s Fiscal Sustainability Report 2021 finds that current fiscal policy, if maintained over the next 75 years, is not sustainable over the long term for the government sector as a whole. Increasing government indebtedness is primarily driven by the provincial-territorial sector, which will more than offset the fiscal flexibility at the federal level.

“Relative to the size of the Canadian economy, total net debt would ultimately rise above its initial level over the long term”, says Yves Giroux, PBO. “That being said, government indebtedness is projected to remain well below its peak observed over the last 30 years.”

Based on the PBO’s latest assessment, the federal government, and the provinces of Quebec, Nova Scotia, as well as Ontario, all have some fiscal room to increase spending or reduce taxes. Status quo fiscal policy is not sustainable in the remaining provinces and the Territories in light of the demographic projections.

The assessment identifies Canada’s ageing population as a key pressure for all provinces and territories. “Healthcare makes up a large share of provincial and territorial spending and it will continue to outpace growth in the economy as the population ages,” adds Mr. Giroux. “In most jurisdictions, the Canada Health Transfer will not keep pace with rising healthcare spending.”

According to Mr. Giroux, “Given their temporary nature, federal COVID-19 support measures do not have a material impact on long-term fiscal sustainability.” The estimate of federal fiscal room is effectively unchanged from the PBO’s November 2020 assessment and reflects an improvement in the medium-term outlook for nominal GDP and revenues.

The PBO’s Fiscal Sustainability Report is designed to identify whether changes in current fiscal policy are necessary to avoid unsustainable growth of government debt and estimate the magnitude of those changes using the fiscal gap.

PBO estimates cost of firearm compensation could reach over $750 million

The Parliamentary Budget Officer (PBO) today released his estimate, under various scenarios, of the cost of firearm compensation as part of the Government’s proposed firearm buy-back program. 

Despite additional carbon pricing, significant emissions reduction will be required to exceed the Paris target

The Parliamentary Budget Officer (PBO) today released his assessment of the impacts of the Government’s plan to exceed the 2030 target for Canada’s greenhouse gas emissions under the Paris Agreement.

Higher Interest Rates Dampen Stimulative Impact of Budget 2021

The Parliamentary Budget Officer (PBO) today released his impact assessment of Budget 2021 measures.

The report extends the PBO’s previous assessment of Budget 2021 stimulus spending to include additional budgetary measures, as well as the potential monetary policy response.  The report also provides a sensitivity analysis on the resulting post-budget scenario.

“We estimate that Budget 2021 measures will provide a temporary boost to real GDP growth in 2021 and 2022.  By the end of 2025, we estimate that Budget 2021 measures will increase employment by 89,000 net new jobs,” says PBO Yves Giroux.

In the PBO’s assessment, monetary policy responds to the increase in economic activity and higher inflation, raising the policy rate by 50 basis points in the second half of 2022, relative to the PBO’s pre-budget outlook.

“Higher interest rates will dampen the stimulative impact of Budget 2021 measures. This means that government revenues will not increase to their full extent.  The cost of servicing the Government’s existing debt will also be higher,” adds Mr. Giroux.

The PBO’s post-budget scenario does not include any new economic developments since the March pre-budget outlook.  It reflects only the impacts of Budget 2021 measures relative to the PBO’s pre-budget outlook.

Under the PBO’s post-budget scenario, the budgetary deficit reaches $36 billion (1.2 % of GDP) in 2025-26 and the federal debt settles at 49.2 % of GDP in 2025-26.

To illustrate the uncertainty surrounding the post-budget scenario, the report presents distributions of possible future outcomes based on the past forecast performance of private sector economists in Finance’s Canada survey.

“Assuming no future policy actions, we estimate that there is only a 5% chance the budget will be balanced or in a surplus position in 2025-26.  We also estimate that there is a 35% chance the federal debt ratio in 2025-26 will be above its 2021-22 level of 51.3% of GDP,” says PBO Yves Giroux.

Canada Infrastructure Bank unlikely to meet spending objectives, says PBO

The Parliamentary Budget Officer (PBO) today released an analysis of the Canada Infrastructure Bank’s (CIB) spending and investment commitments since its inception in 2017 as part of the Government’s $187.8 billion Investing in Canada Plan.

Improved outlook for the Canadian economy heading into Budget 2021

The Parliamentary Budget Officer (PBO) today released his pre-budget outlook.  The report incorporates fiscal measures announced by the federal government in its Fall Economic Statement, except for the $70-to-$100 billion earmarked for stimulus spending.

Based on current policy, the PBO projects economic growth of 5.6% in 2021 and 3.7% in 2022, up by almost a full percentage point in both years compared to the September 2020 outlook.

Before any Budget 2021 measures, budgetary deficits for 2020-21 and 2021-22 would amount to $363.4 billion and $121.1 billion, respectively (or 16.5% and 5.0% of GDP).  The federal debt-to-GDP ratio would rise to 49.8 per cent of GDP in 2021-22 and then gradually decline to 45.8 per cent of GDP in 2025-26.

“The improved outlook reflects higher commodity prices, a stronger U.S. recovery and the earlier-than-expected arrival of effective vaccines,” says PBO Yves Giroux.  “We project employment to reach its pre-pandemic level by the end of 2021 and the unemployment rate to decline steadily through 2022.”

Compared to the PBO’s pre-crisis outlook, the projected level of nominal GDP is essentially unchanged over 2022 to 2025.  This rebound in the Government’s tax base effectively returns budgetary revenues to their pre-pandemic path.

Setting aside the Government’s earmarked stimulus and potential Budget 2021 measures, the risks to the improved outlook are roughly balanced.  

“However, the Government’s $70 to $100 billion earmark for stimulus spending and potential budget measures pose an upside risk to our economic outlook and will increase the deficit,” adds Mr. Giroux.

According to Mr. Giroux, “Should measures in the upcoming budget translate into new permanent programs that are deficit financed, the sustainable debt-to-GDP trajectory we project over the medium- and long-term could be reversed.”

Current Canadian Surface Combatant (CSC) program to cost at least $77.3 billion, says PBO

The Parliamentary Budget Officer (PBO) today released an updated cost estimate of the Canadian Surface Combatant (CSC) program. This report was prepared in response to a request from the House of Commons Standing Committee on Government Operations and Estimates (OGGO).

The report, The Cost of Canada’s Surface Combatants: 2021 Update and Options Analysis, examines the cost of the existing CSC program, which is intended to replace both the current fleet of Halifax-class frigates and three decommissioned Iroquois-class destroyers with a new fleet of 15 warships, based on the Type 26 ship design.    

“We estimate the fleet of new ships, based on the Type 26 design, will cost $77.3 billion to build”, said Yves Giroux, PBO.  “A one-year delay would increase that cost to $79.7 billion, and a two-year delay would see the cost rise to $82.1 billion.”

The PBO’s latest cost estimate to build the Type 26 ships shows an increase of $7.5 billion over his 2019 estimate due to updates in the ship’s specifications and production timelines.

The report also presents a cost analysis of two other ship designs: the FREMM European multi-mission frigate and the Type 31e, a class of general-purpose frigates planned for the United Kingdom’s Royal Navy.

The cost of acquiring 15 FREMM ships is estimated at $71.1 billion, while the cost of a fleet of 15 ships based on the Type 31e design is estimated at $27.5 billion.  These estimates are inclusive of cancellation costs, running a new competitive design selection process, and an additional four-year delay in the start of construction. It is important to note that these ships have different characteristics and capabilities.

The report also considers the cost of a mixed fleet: three of the Type 26 ships and 12 ships of either of the alternate designs.  Under this scenario the costs increase to $71.9 billion for the mixed FREMM fleet, and $37.5 billion for the mixed Type 31e fleet.